Financial advice needed for my parents

[busyknee]

My parents are both mid 70s and retired. They own a house worth around £400. And they've paid off their mortgage.

They both have pensions that cover their day to day expenses, bills and food, but no extras such as holidays or christmas etc. They used to pay for these things out of their savings.

It has recently transpired that they've spent all their savings helping my brother out.

I don't want to get into this here, but my brother has had a lot of MH problems, legal problems and debt.

My parents have got into £150k of debt helping him. I had no idea about this.

They now need to pay this off. Plus if they want to enjoy holidays etc in retirement they need some extra to put back in their savings pot.

They are thinking of using their house to raise the money, but having looked into it, they've found that if they do this the company will collect double the original amount when they die/sell. So they'd lose £300k, leaving about £100k in equity in the house as their legacy.

They're devastated by this as they wanted to leave money to grandchildren and they're concerned about the costs they'll force on us if they need to go into a home when they're older. They think nice homes are £2k a month. They'd assumed the house would pay for this.

Any advice at all about what they could do?

They're getting really depressed about the situation.

I appreciate that they're actually very well off compared to a lot of people, but this isn't the retirement they had envisaged for themselves.

No-one can make you pay for their care when they are older, only their own funds could be used. If they have no savings then they would not be able to afford one of the nicest Nursing homes unfortunately.
The obvious answer would be to downsize ( if possible ) and pay off their debts.
If they only receive basic state pension they may be entitled to some pension credit.
Probably best to speak to CAB or Age Uk for advice.

Sorry , posted too early - so the most obvious solution would be to sell the 400k house , pay off the 150k debts and buy a property with the rest. I guess it may mean moving to a cheaper area.

I would really ecourage not to go down the equity release road. They would be much better off downsizing. FIL took out equity release for similar reasons and because he didn't want to bother us - he died 3 weeks later and the equity release bunch got their money.

Oh Frenchfancy, that's awful.

Another vote for AgeUk and downsizing

What a awful situation for you. I went through looking for equity realease for my mum. The numbers never stacked up so she sold and down sized. Best decision ever it's taken a huge strain off mum.

I was going to suggest downsizing too. And looking if they’re entitied to anything. I doubt there will be much/anything for the grandchildren after the £££ spent on your brother + care home fees. Also,I’m no expert but from my MIL looking into fees, £2k per month won’t cover anything - apparently it’s more along the lines of 3-4k per person per month.

I’d also think about downsizing rather than taking additional debt on the property.

Care home fees can vary a lot but we were recently paying about £2000 per week (!!!) for a nice home in the SW.

Also if providing for grandchildren is important then consider making cash gifts sooner rather than later, so that you don’t have to pay inheritance tax on the amounts destined for grandchildren.

Agree, avoid equity schemes as these will eat in to any capital in the property. Downsizing is probably the best solution but it also might be worth looking ad these loans. Are they secured against the house, were they appropriately sold. Is your dbro in any likelihood of being able to reimburse them.

Equity release schemes are a total con.

Have they even considered downsizing? 400k is a big house where I am but less so in SE I guess!

Care home fees here, local authority rate, is about £500 a week and that'll be the shitty end if the scale.

Is your brother sorted now? You don't want him popping up and taking more money.

Radio 4 ‘s Moneybox program last week was all about equity release. Lots of disillusioned people ringing in. Basically the debt doubles every 10years, so if you borrow £100 000 against the house, after ten years you’d have to repay £200 000.And that’s with the better, more ethical schemes. Others schemes can mean you borrow a modest amount but due to servicing the debt you have very little to leave to your kids after you die. Try and listen to the program on the the iPlayer.

Thanks all. I'll have a listen to Moneybox.

Downsizing would certainly make the most sense, but I don't think they'll want to. It's a fairly modest house, but in a pretty expensive area. They're very happy there and are very friendly with their neighbours. They'd be gutted to move.

I guess the equity release scheme only really works for you if the house goes up in value by a lot in the ten years your debt doubles. But I guess that's pretty unlikely now with the market as it is.

I had no idea care homes were so expensive. Just had a look at a few near my house and the cheapest was £800 a week.

All this has made me a bit nervous about the future. We're looking to buy a house at the moment and I'm now thinking we should drastically scale back how much we borrow on our mortgage.

So difficult.

What's done is done.

Think about what happens when one dies. Cost of living does not halve. Who has what pension?

Forget the inheritance, brother has blown that. Like or not they have to downsize.

Is your brother in a postion to start making repayments on the 150k loan? If not, I think downsizing sounds the only option

150k of debt makes me want to cry busy it's quite refreshing to read a post here that isn't the bitter sibling wanting their half.

I presume your brother doesn't have the capacity to repay. God I dunno what to suggest, my heart breaks for you, id suggest they sell up downsize and give db fuck all else. But is it realistic?

My MILs care house fees are £1100 a week. I would suggest they downsize and pay off the debts too.

Check their entitlement to pension credit, council tax benefit etcetera. Equity release is not a good idea, downsizing will keep their capital intact.

Start looking at sheltered options. If they are going to move they only want to move once, because of the cost. (Note, NOT retirement living.) My mum, now 88 and with no memory, is in "very sheltered" which means own flat but 24 hours warden, reception open 6am-10pm, handyman, optional "restaurant", laundry etc. Service changes are about £500 pcm, which given the extras is not bad. Even buying in care on top makes it far cheaper than a care home. And the support means she is able to stay there in a way that she could not stay in her own home. Plenty of people move in earlier at a point when they drive and simply use the flat as a flat. It means that they are future proofed should one become ill or widowed, with a supportive community around them.

The people running my mum's are Retirement Security Ltd. Absolutely brilliant. And yes care homes can be up to £2,000 a week in her area.

Take a look at housing options. Then sit down with them and work out a budget. Look at things they might be entitled to. Find out if they feel bullied by your brother, or unable to say no. Suggest that they give you financial POA. Once sorted its quite easy. Have bills come to you (mail redirect) and just do everything by DD or internet banking. Given them a small debit card only savings account. Even at 88, severely disabled with her memory problems, so needing 3 hours care a day, I am keeping my mum's costs down to about £2,500pm including service charge, though I do need to bump up care if she is ill. If she were younger and did not need support she could get by on about £1000 pcm using whatever left over for extras.

I would add that they are young enough to make a fresh start and to get to know new people. So if they cant get the numbers to add up where they are, perhaps this is the right time to move.

Do not get involved in equity release.

The adverts make me angry. Financial suicide.

Downsize.

They need to get proper financial advice from a financial advisor. Do they have local friends who can recommend anyone? That's often the best way of finding a good one.

Good FAs help people plan for retirement.

This is awful. With respect to care home costs, £1000/ wk is a good "nice" home fee basis. Unfortunately, should they require any kind of funding from local authority, I think LA could well simply refuse on the basis of "intentional deprivation of assets" given the vast amounts of money they've given to your DB at such a late stage in life. As pp have said, Age UK are a good source of advice (Inc on the deprivation of assets issue) and a solicitor can help them understand their current situation as well as implications of future choices. Good luck.

Steer clear of equity release!! Your parents really need some proper advice from an IFA, an independent financial adviser. You can pay them a one-off fee for advice, so you don't have to worry about them trying to sell you something for the commission. They will be able to look at the whole picture, and come up with options.

I'd get advice from a good solicitor - they have experience of dealing with the other side of equity release - people living with consequences and looking for advice to see if they can claim "didn't fully understand/poor advice" etc. You can't by the way, you'll be stuck with it.

An IFA will be about products and not so much on the receiving end of the problems that later arise in families due to these type of schemes.

Any chance of them having a lodger?

Perhaps a Monday to Friday only person. You said they live in a decent area do this may help with their day to day living costs.